What is the Difference Between Insurance and Assurance?
Updated On Dec 06, 2020
Online purchasing has made the entire process of getting insurance incredibly simple. Moreover, it has also made it far simpler for customers to compare the different plans, insurance companies, and benefits offered. However, with so many offers to choose from it is equally important to make an informed decision when purchasing the insurance. But Insurance terminology can often be puzzling for those of us who are unfamiliar with it. Two terms that most people who are new to insurance mix up are Insurance and Assurance. In this article, we will explain exactly what they mean and how they are different from each other.
What is the Meaning of Insurance?
Insurance is a contractual agreement under which the insurance provider compensates the policyholder for any losses or damages caused due to an uncertain event. This compensation is offered in exchange for a predetermined amount of money, i.e., the insurance premium. The more coverage a certain plan offers the higher the premium. In other words, insurance is a risk cover tool. This type of agreement is used in car insurance, bike insurance, and health insurance primarily.
What is the Meaning of Assurance?
The term assurance is similar to insurance in that they both offer financial coverage but their usage and scope are different. Assurance promises to reimburse a predetermined amount of money when an inevitable event occurs, such as death or when the tenure of the policy is over. This type of coverage is usually given in life insurance policies which can be further divided into three types. Whole Life Insurance, Term Life Insurance, and Annuity.
What is the Difference Between Insurance and Assurance?
Insurance and assurance both offer financial coverage, but differ on certain another basis:
- Meaning: Insurance provides compensation for uncertainties such as natural calamities or medical emergencies. Assurance provides coverage for an inevitable event such as death or tenure completion.
- Objective: Insurance gives financial stability in the face of uncertainties. Assurance pays out a predetermined sum when an event takes place.
- Principle: Insurance is based on the principle of indemnity whereas assurance is based on the principle of certainty.
- Insurance Type: Insurance is available for general insurance such as motor, health, fire and liability insurance. Life Insurance(except term insurance) offers financial coverage following the idea of assurance.
- Claim Settlement: Insurance provides compensation only after an uncertain event occurs. Assurance provides payment if the event occurs or the policy matures.
- Policy Duration: Insurance policies are usually short term, whole life insurance policies based on assurance are usually long term.
Conclusion
To conclude, even though insurance and assurance are similar in that they both provide financial compensation, they are different in their scope and usage. It is important to know and understand these terms if you want to purchase insurance. To read about health insurance click here.
Disclaimer: This article is issued in the general public interest and meant for general information purposes only. Readers are advised not to rely on the contents of the article as conclusive in nature and should research further or consult an expert in this regard.
